ABOUT Established in 2008, Cavendish Maxwell is one of the largest and most respected property consultancies in the region. An influential partner and trusted advisor to key stakeholders in real estate markets throughout the Middle East and North Africa, we offer a comprehensive range of exceptional property services across a diverse mix of sectors and asset classes. Cavendish Maxwell is a fully certified member firm of the Royal Institution of Chartered Surveyors (RICS), bringing together a world-class team of handpicked property consultants and surveyors, unmatched elsewhere in the region. Our team of highly qualified professionals is trusted by real estate market stakeholders throughout the region, including international and domestic banks, property developers, governments, owners and investors, asset managers and professional services firms. We service a diverse mix of specialist property sectors including retail, offices, hospitality, healthcare, education, industrial and logistics. Cavendish Maxwell also publishes independent reports, prepared to globally accepted standards, for loan security, bank lending, audit, insurance reinstatement, dispute resolution, risk management, debt recovery, performance analysis, purchase and sale advice, and third-party reliance purposes. Our quarterly market reports provide updates on price movement, rent and yield statistics, residential transactions, and upcoming supply of residential properties through Property Monitor, the real estate intelligence platform, powered by Cavendish Maxwell. The reports also incorporate the Property Monitor Residential Survey, conducted among partner agents operating within the UAE. The survey provides an overview of how new enquiries, leasing activity and transactions, among other metrics, changed compared to the previous quarter.
FOREWORD Real estate market conditions remained similar to the previous quarter as prices and rents continue to soften. Supply remains the primary driver for price declines, and developers continue to offer attractive payment options with the aim of turning tenants into owner-occupiers. However, price declines have brought properties within the reach of many, with transaction volumes increasing and tenants choosing to upgrade to better locations and larger units. With an aim to address the demand-supply mismatch and boost confidence in the sector, Dubai has announced the formation of a real estate planning committee. The body will prevent duplicate projects from being launched in the market and ensure projects add value to the sector and economy. Continuing from the previous quarter, average sales prices and rents softened across most residential communities in Dubai in Q3 2019. Handovers for the rest of 2019 are expected to average between 5,000 and 7,000 units, following materialisation rates of previous years. Looking ahead, results of the Property Monitor Residential Survey show that over 60% of agents surveyed predict residential prices and rents to decline by at least 5% in the upcoming quarter. Office rents continued their decline into the third quarter with landlords settling on lower effective rates and providing incentives. Across retail categories too, occupancy and rents continued to fall. Hotel occupancy declined 1.9% in JanuaryAugust 2019 versus the same period a year ago, with the decline most evident in the luxury sector as it faces increasing competition from short-term rental accommodation and holiday homes. Cavendish Maxwell’s third quarter report for 2019 gives a holistic view of the UAE real estate market overall, with an overview of the residential, office, retail, hospitality and industrial sectors in Dubai, Abu Dhabi and the Northern Emirates.
CONTENTS 4
Residential Market Overview
26
Commercial Market Overview
30
Hospitality Market Overview
32
Industrial Market Overview
Q 3 2O19
UAE PROPERTY MARKET REPORT
DUBAI APARTMENT PRICE PERFORMANCE According to Property Monitor, average apartment prices declined by 16.5% over the 12-month period from Q3 2018 to Q3 2019. International Media Production Zone (IMPZ) registered the steepest decline of nearly 25%. Other communities including Downtown Burj Khalifa, Discovery Gardens, Jumeirah Lakes Towers (JLT) and International City also saw notable declines of over 17% each. Supply remains the primary driver for price declines, with developers attempting to entice buyers with attractive payment plans. The recent decision of the UAE Central Bank to lower the early settlement fee for mortgages is expected to help borrowers build savings as they switch to lenders offering better rates.
-3%
Palm Jumeirah
-12.2% -2.7%
DIFC
-14.5% -4%
Al Furjan
-16.8% -3.5%
The Views
-15.1% -2.7%
Jumeirah Village Circle (JVC)
-14.4% -3.2%
Business Bay
-15.7% -4.5%
Jumeirah Beach Residence (JBR)
-16.2% -3.9%
Dubai Marina
-15.6% -3.5%
Uptown Motor City
-15.9%
-3.9%
Dubai Sports City
-17.4% -2.4%
International City (Clusters)
-17.7%
-3.1%
Jumeirah Village Triangle
-16.4%
-3.5%
Downtown Burj Khalifa
-18.2% -4%
Dubai Silicon Oasis
-12.7% -4.3%
Jumeirah Lakes Towers (JLT)
-17.7% -4.5%
The Greens
-16.8% -5%
Discovery Gardens
-19.4% -5.2%
IMPZ
0
-1
-2
-3
-4
-5
-6
-24.6%
-7
-8
-9 -10 -11 -12 -13 -14 -15 -16 -17 -18 -19 -20 -21 -22 % change
Quarterly Q2 2019 - Q3 2019
Source: Property Monitor 4
Yearly Q3 2018 - Q3 2019
-23
-24
-25
UAE PROPERTY MARKET REPORT
Business Bay AED 1,219/sq ft
DIFC AED 1,503/sq ft
Downtown Burj Khalifa AED 1,926/sq ft
Palm Jumeirah
International City (Clusters)
AED 1,835/sq ft
AED 483/sq ft
Jumeirah Beach Residence AED 1,346/sq ft
Dubai Silicon Oasis AED 681/sq ft
Jumeirah Lakes Towers AED953/sq ft
The Greens AED 1,040/sq ft
The Views AED 1,308/sq ft
Jumeirah Village Circle
Dubai Marina
AED 792/sq ft
AED 1,352/sq ft
Uptown Motor City AED 699/sq ft
Discovery Gardens
Dubai Sports City
AED 625/sq ft
AED 764/sq ft
IMPZ Al Furjan
AED 607/sq ft
AED 870/sq ft
5
RESIDENTIAL
Q 3 2O19
Q 3 2O19
UAE PROPERTY MARKET REPORT
DUBAI VILLA/TOWNHOUSE PRICE PERFORMANCE According to the PMI, average villa/townhouse prices declined 15% over the 12-month period from Q3 2018 to Q3 2019. The average rate of decline in villa/townhouse prices across key communities increased year-on-year, with communities such as Cedre Villas - Dubai Silicon Oasis, Victory Heights and Jumairah Islands witnessing a decline in the range of 16% to 19%.
-3.8%
Victory Heights
-18.6% -4.6%
Cedre Villas Silicon Oasis
-19% -3.3%
The Meadows
-15.7% -4.9%
Jumeirah Islands
-16.2% -4%
Arabian Ranches
-14.6% -4.1%
Al Furjan Villas
-15.4% -2.6%
The Lakes
-15.2% -3.4%
The Springs
-14.6% -3.8%
Jumeirah Park
-14.2% -2.8%
Jumeirah Village Triangle
-13.3%
-1.6%
Jumeirah Golf Estates
-9.8%
-2.1%
Green Community Motor City
-11.3% -3.7%
The Fronds Gardens Homes Palm Jumeirah 0
-1
-2
-3
-4
-5
-16%
-6
-7
-8
-9 -10 -11 -12 -13 -14 -15 -16 -17 -18 -19 -20
% change
Quarterly Q2 2019 - Q3 2019
Source: Property Monitor 6
Yearly Q3 2018 - Q3 2019
UAE PROPERTY MARKET REPORT
The Fronds Garden Homes Palm Jumeirah AED 2,175/sq ft
Jumeirah Park AED 884/sq ft
Jumeirah Islands Cedre Villas Silicon Oasis
AED 1,178/sq ft
AED 725/sq ft
The Meadows AED 980/sq ft
The Lakes AED 1,133/sq ft
Green Community Motor City AED 852/sq ft
Arabian Ranches
The Springs
AED 941/sq ft
AED 863/sq ft
Jumeirah Village Triangle AED 792/sq ft
Victory Heights AED 870/sq ft
Al Furjan Villas
Jumeirah Golf Estates
AED 685/sq ft
AED 1,082/sq ft
7
RESIDENTIAL
Q 3 2O19
Q 3 2O19
UAE PROPERTY MARKET REPORT
DUBAI RENT PERFORMANCE Rental declines for apartments in Dubai averaged 15%, whilst villas/ townhouses registered a 12% fall over the 12-month period from Q3 2018 to Q3 2019. In the communities of International City, Sports City and JLT, downward pressure on apartment rents was more pronounced, with declines between 17% and 21%. Meanwhile, villa/townhouse communities including Victory Heights, Arabian Ranches, Jumeirah Golf Estates and The Meadows registered an average decline of 12% in rents.
-13.7
Annual rent by bedroom * Data as of September 2019
-16.9
Dubai Marina
The Greens
AED 59,160 AED 82,770
AED 50,140 AED 59,250
AED 115,500
APARTMENT Studio
VILLA/TOWNHOUSE 3 BR
1 BR
4 BR
2 BR
5 BR
12-month % change
12-month % change
AED 91,000
-18.1 -9.7
JLT
JBR
AED 45,250
AED 59,850 AED 103,250
AED 64,240
-15 The Views
AED 85,800
AED 113,400
AED 57,340 AED 75,225 AED 100,100
-11 The Lakes AED 162,500 AED 250,100 AED 333,320
-9 The Meadows AED 156,750 AED 196,000
-11
AED 239,200
Jumeirah Islands
-14
AED 228,800 AED 316,800
-12
Jumeirah Park
AED 135,600 AED 142,800
AED 187,050
AED 32,450 AED 47,250
AED 213,900
-14 Al Furjan Villas AED 128,700 AED 158,000
8
The Springs
AED 155,200
Discovery Gardens
Source: Property Monitor
-11
-8 Jumeirah Golf Estates AED 222,300 AED 237,500 AED 276,000
UAE PROPERTY MARKET REPORT
-11.4 Downtown Burj Khalifa AED 63,450 AED 91,140 AED 132,890
-13.9 -15.5 Business Bay AED 59,807
DIFC AED 63,000
-20.7
AED 86,925 AED 147,600
International City (Clusters)
AED 76,500 AED 101,400
-17.7
-14.5
AED 22,540 AED 30,810 AED 51,000
-16
Dubai Sports City
Motor City
Arabian Ranches
AED 38,500 AED 56,840
AED 45,150
AED 149,730
AED 60,000 AED 96,660
AED 198,000
AED 86,800
AED 252,000
NUMBER OF RENTAL CHEQUES FOR APARTMENTS AND VILLAS/TOWNHOUSES
-16 Victory Heights AED 152,250 AED 225,600
0.4% 5 cheques
0.1% 8 cheques
1.1% 12 cheques
0.1% 9 cheques
3.8% 6 cheques 7.3% 3 cheques 35.1% 1 cheque 21.8% 2 cheques 30.4% 4 cheques
Jumeirah Golf Estate
9
RESIDENTIAL
Q 3 2O19
Q 3 2O19
UAE PROPERTY MARKET REPORT
DUBAI 2019 UPCOMING SUPPLY According to Property Monitor, over 5,280 apartments and 1,080 villas/ townhouses were handed over in Dubai during Q3 2019. Most of the upcoming supply in 2019 is concentrated in a few communities – JVC, Al Furjan, Dubailand and Al Barsha. Apartments make up approximately 70% of the upcoming supply. Actual materialisation rates in 2019 are expected to match previous years at 40 – 50%, with handovers averaging between 5,000 and 7,000 units for Q4 2019. The creation of the committee for real estate planning by Sheikh Mohammed bin Rashid al-Maktoum in September 2019 is specifically aimed at achieving a balance between demand and supply. The committee will ensure that a duplication of projects is avoided and that all projects add value to the economy.
APARTMENTS
70%
VILLAS/TOWNHOUSES
30%
SUPPLY SCHEDULED TO BE COMPLETED BY END OF 2019 >2,500 1,501 - 2,500 <1,500
Source: Property Monitor 10
UAE PROPERTY MARKET REPORT
Deira
Downtown Burj Khalifa
Mohammed Bin Rashid City
Dubai Silicon Oasis
Al Barsha Dubailand
Jumeirah Village Circle
IMPZ
Al Furjan
Dubai Aviation City
11
RESIDENTIAL
Q 3 2O19
Q 3 2O19
UAE PROPERTY MARKET REPORT
DUBAI TRANSACTION OVERVIEW
Off-plan transfers continued to dominate in Q3 2019, accounting for more than 54% of total transfers. The total number of transfers in this period was 10,499 for both villas/townhouses and apartments. Mohammed Bin Rashid City, The Lagoons and Downtown Burj Khalifa were the most sought-after locations for off-plan apartment transfers in Q3 2019. For villas/townhouses, the total volume of secondary transactions increased by 2.7% compared to Q3 2018. However, off-plan market transfers outpaced secondary market transactions during the quarter.
12
419
334
245
83
73
204
104
84
67
44
Dubai South (Dubai World Central)
Arabian Ranches 3
Mohammed Bin Rashid City
Serena
Wasl Gate
Emirates Living
Mohammed Bin Rashid City
Arabian Ranches
Town Square
400
350
300
250
200
150
100
Number of transfers
900 400
800 350
500
400
300
200
100
288
50
0 0
OFF-PLAN
450 401 339 324 161 Bluewaters Island
450
Jumeirah Village Circle
1,000
Dubai Marina
600
Number of transfers
OFF-PLAN
International City
Number of transfers 700
Al Furjan
311
Liwan
The Lagoons (Creek Harbour)
357
Dubai Harbour
412
Downtown Burj Khalifa
859
Mohammed Bin Rashid City
0
Villanova
Number of transfers
Q 3 2O19
TOP 5 LOCATIONS FOR APARTMENT TRANSFERS IN Q3 2019 SECONDARY MARKET
300
250
200
150
100 50
150
TOP 5 LOCATIONS FOR VILLA TRANSFERS IN Q3 2019
SECONDARY MARKET
300
250
200
150
100
50
0
Source: Property Monitor
13
RESIDENTIAL
UAE PROPERTY MARKET REPORT
Q 3 2O19
UAE PROPERTY MARKET REPORT
SURVEY RESULTS Q3 2019
PREDICTIONS
REALITY
The majority of agents surveyed predicted apartment and villa/townhouse prices would decrease by up to 5%.
Apartment and villa/townhouse prices declined by 3.6% on average in Q3 2019, with a 12-month decline of 15.7% on average.
For apartment and villa/townhouse rents, the majority of agents surveyed predicted that rates would decrease by up to 5%. New buyer enquiries, seller instructions and agreed sales were predicted to increase by the majority of agents surveyed.
14
vs
Apartment and villa/townhouse rents declined by 3.6% on average in Q3 2019, with a 12-month decline of 13.5% on average. According to data from real estate agencies, transaction levels in Q3 2019 were higher than Q2 2019.
UAE PROPERTY MARKET REPORT
LOOKING FORWARD – Q4 2019 Q4 2019 PRICE OUTLOOK Decrease by more than 5%
Decrease by up to 5%
Increase by more than 5%
Increase by up to 5%
Remain the same
APARTMENTS
VILLAS/TOWNHOUSES
% of agents who predicted apartment prices would:
% of agents who predicted villa/townhouse prices would:
19.8%
24.7%
21% 27.2%
13.6% 8.6%
40.7%
1.2%
42%
1.2%
Q4 2019 RENT OUTLOOK Decrease by more than 5%
Decrease by up to 5%
Increase by up to 5%
Remain the same
APARTMENTS
VILLAS/TOWNHOUSES
% of agents who predicted apartment rents would:
% of agents who predicted villa/townhouse rents would:
28.4%
18.5%
28.4%
7.4%
45.7%
7.4%
16%
48.1%
Q4 2019 TRANSACTION OUTLOOK Decrease
Increase
Remain the same
NEW BUYER ENQUIسبيسRهههههههIESييشيسشيش
NEW SELLER INSTRUCTIONS
AGREED SALES
% of agents who prediالبياغبيc ted new buyer enquiries would:
% of agents who predicted new seller instructions would:
% of agents who predicted agreed sales would:
23.2%
14.6%
62.2%
39%
12.2%
48.8%
34.1%
12.2%
53.7%
Source: Property Monitor 15
RESIDENTIAL
Q 3 2O19
Q 3 2O19
UAE PROPERTY MARKET REPORT
ABU DHABI PRICE PERFORMANCE Average sales prices declined in Abu Dhabiâ&#x20AC;&#x2122;s major investment zones by 15% for apartments from Q3 2018 to Q3 2019. Villa/townhouse prices registered an average decline of 12.7% over the same period.
16
UAE PROPERTY MARKET REPORT
As of September 2019, prices in Al Reem Island declined over 20% followed by Al Raha Beach, Saadiyat Beach Residences and Ghadeer, which fell 13%, according to prices tracked by Property Monitor. The quarterly change for apartments from Q2 2019 to Q3 2019 was 4.3%. In the case of villas too, prices declined 3.4% during the quarter across all investment zones. Recent legislation to ease visa regulations and foreign business ownership is likely to drive the real estate market in Abu Dhabi and the UAE, given that many of the changes in visa regulations are linked to property ownership. In addition, business-investment visas have also been approved. Property developers are waiving registration and transaction fees, offering flexible payment plans from five to 10 years, bundling special offers on maintenance, and are even offering incentives ranging from furniture vouchers and home appliances to holiday packages and cars. Optimism continues to grow following the implementation of the new freehold law allowing foreign investors to buy property or land within 15 designated investment zones. The move is expected to increase real estate investments by expats, and as a result stimulate the economy.
APARTMENT PRICE PERFORMANCE
Al Raha Beach Al Reem Island
-2.5%
-13%
1,340
-4.3%
-13.6%
1,184
-7.6%
-20.7%
Al Ghadeer
961
-3.4%
-12.9%
Al Reef Downtown
770
-3.5%
-14.3%
-22% -20% -18%
AED/sq ft
% change
Saadiyat Beach Residences
-16% -14% -12% -10% -8%
-6%
Yearly Q3 2018 - Q3 2019
-4%
689
-2%
200
0
400
600
Quarterly Q2 2019 - Q3 2019
800
1000
1200
1400
1600
Average Price Per sq ft
Source: Property Monitor
VILLA/TOWNHOUSE PRICE PERFORMANCE
-3.8%
-14.1%
Al Reef Villas
-4.5%
-12%
Saadiyat Beach Villas
600
-2%
-11.9%
-14%
-12%
787
-10%
-8%
Yearly Q3 2018 - Q3 2019
-6%
-4%
-2%
AED/sq ft
% change
Al Raha Gardens
1,395
0
200
Quarterly Q2 2019 - Q3 2019
400
600
800
1000
1200
1400
1600
Average Price Per sq ft
Source: Property Monitor 17
RESIDENTIAL
Q 3 2O19
Q 3 2O19
UAE PROPERTY MARKET REPORT
ABU DHABI RENT PERFORMANCE Rents in Abu Dhabi continued to fall in Q3 2019, for both apartments and villas/townhouses. The average annual decline was 13.7% for the 12-month period from Q3 2018 to Q3 2019. Villas/townhouses in Saadiyat Beach Villas and Al Raha Beach displayed a steep decline in rents, averaging 13.8% annually. Over the same period, rents for apartments across prominent locations also exhibited similar declines. Meanwhile, it will be interesting to see if the forthcoming introduction of toll gates in the capital and the new carpooling system has an effect on where residents choose to live. The Department of Transport has announced that it will start charging passengers toll fees on January 1, 2020 through the four toll gates at Al Maqta, Mussaffah, Sheikh Zayed and Sheikh Khalifa bridges.
APARTMENT RENT PERFORMANCE
-3.6%
-13.7%
Al Raha Beach % change
53,770 40,700 28,175
-13.4%
-11.3%
Al Reef Downtown Al Reem Island
73,710
-5.3%
-5% -3%
37,320
-18.4%
80,451 77,847
68,400 47,250
-6.2%
87,000
-11%
Saadiyat Beach Residences -18%
-16%
Yearly Q3 2018 - Q3 2019
-14%
-12%
-10%
-8%
-4%
-6%
Quarterly Q2 2019 - Q3 2019
154,035
95,000
-3.1%
-20%
108,000
-2%
0
50,000
Studio
Rent (AED/annum)
Al Ghadeer
100,000
1 BR
150,000
200,000
2 BR
Source: Property Monitor
% change
-4%
132,770 114,500 104,232
-14.9%
Al Reef Villas
-3.2%
369,150 329,960 309,600
-12.2% -2.4%
Saadiyat Beach -15%
-14%
Yearly Q3 2018 - Q3 2019
Source: Property Monitor 18
188,505 161,000 128,250
-14.1%
Al Raha Gardens
-13%
-12%
-11%
-10%
Quarterly Q2 2019 - Q3 2019
0
100,000
3 BR
200,000
4 BR
300,000
400,000
5 BR
Rent (AED/annum)
VILLA/TOWNHOUSE RENT PERFORMANCE
UAE PROPERTY MARKET REPORT
ABU DHABI
2019 UPCOMING SUPPLY According to Property Monitor, 5,000 â&#x20AC;&#x201C; 5,500 residential units are expected to be delivered during the rest of 2019. The upcoming units are spread across both investment zones and the Abu Dhabi mainland. Over 3,200 units are expected to be handed over in Abu Dhabi City, Zirku Island and Al Raha Beach.
Supply scheduled to be completed in Q4 2019
APARTMENTS
82%
>1,000 501 - 1,000
VILLAS/TOWNHOUSES
100 - 500
18%
<100
Source: Property Monitor
Wahat Al Zaweya
Zirku Island
Saadiyat Island Al Zahiyah
Sowwah Square Al Reem Island
Al Raha Beach Khor Al Raha (Samaliyah Island)
Abu Dhabi City Rawdhat Danet Abu Dhabi
Mussaffah
19
RESIDENTIAL
Q 3 2O19
Q 3 2O19
UAE PROPERTY MARKET REPORT
NORTHERN EMIRATES RESIDENTIAL MARKET OVERVIEW
Rents and sales prices continued to fall through Q3 2019 in the Northern Emirates, mirroring the trend in Dubai and Abu Dhabi.
AVERAGE RENTAL RATES Q3 2019 45,000
20,000
25,000
21,000
28,000 14,000
15,000
17,000
20,000
16,000
25,000
16,000
30,000 17,000
Rent (AED/annum)
35,000
22,000
40,000
10,000 5,000 0 Studio
1 BR
Sharjah
Source: Cavendish Maxwell
20
Ajman
Ras Al Khaimah (excluding premium locations)
UAE PROPERTY MARKET REPORT
Despite softening prices, the Northern Emirates continue to offer good yields as the decline has been more pronounced in sales prices rather than rents.
2 BR
Fujairah
30,000
40,000
35,000
38,000
23,000
32,000
28,000
30,000
34,000
43,000
With properties in Dubai now within the reach of many tenants and potential owners, the increased choice available to consumers is expected to keep the Northern Emiratesâ&#x20AC;&#x2122; residential markets under pressure. In addition, measures by the government to boost investment and residency such as long-term visas, easing of freehold property laws and economic stimulus packages are expected to garner interest for property among investors.
3 BR
Umm Al Quwain
21
RESIDENTIAL
Q 3 2O19
Q 3 2O19
UAE PROPERTY MARKET REPORT
SHARJAH RESIDENTIAL MARKET OVERVIEW
After a spate of project launches following the opening of freehold ownership in 2014, developers in Sharjah are now slowing down new property launches to focus on completing existing projects. Whilst oversupply is not the immediate factor stoking price declines, the emirate continues to have a spillover effect of the property situation in Dubai. Sharjah is already witnessing an increasing number of existing and potential residents explore options in Dubai due to its increasing affordability and narrowing rental gap. Also, newer and good quality developments in neighbouring Ajman are leading to tenants considering the emirate as a suitable alternative option. According to government data, Sharjah recorded real estate transactions worth AED 14.7 billion in the first six months of 2019 with the Muwaileh Commercial Area, Al Khan and Al Nahda generating the highest interest.
AVERAGE RENTAL RATES (AED/ANNUM) Q3 2019 PRIME APARTMENTS
PRIME APARTMENTS
Studio
1 BR
2 BR
3 BR
Studio
1 BR
2 BR
3 BR
20,000
27,000
35,000
48,000
23,000
37,000
50,000
60,000
SECONDARY APARTMENTS
SECONDARY APARTMENTS
Studio
1 BR
2 BR
3 BR
Studio
1 BR
2 BR
3 BR
16,000
23,000
27,000
38,000
18,000
25,000
32,000
40,000
Source : Property listings as of September 2019
22
UAE PROPERTY MARKET REPORT
Al Azra Rolla Wasit Suburb Abu Shagara Al Majaz Al Khan
Al Rahmaniya
Al Taawun Al Nahda
Al Jurainah
Hoshi
Al Suyoh
Al Tai
PRIME VILLAS 4 BR
5 BR
6 BR
90,000 - 100,000
110,000 - 120,00
130,000 - 140,000
4 BR
5 BR
6 BR
75,000 - 85,000
90,000 - 100,000
110,000 - 115,000
SECONDARY VILLAS
23
RESIDENTIAL
Q 3 2O19
Q 3 2O19
UAE PROPERTY MARKET REPORT
AJMAN RESIDENTIAL MARKET OVERVIEW Real estate rents and prices in Ajman witnessed declines, albeit to a lesser extent than its neighbours.
Al Jurf
Al Bustan
Rashidiya Overall, Ajman has experienced the lowest decrease in rents and prices among other emirates. A wave of project completions especially in new residential high-rises, newly developed communities and attractive yields are proving to be factors working in favour of investments into Ajman.
Al Rawdha
Al Naemiya
AVERAGE RENTAL RATES (AED/ANNUM) Q3 2019 PRIME APARTMENTS
Newer buildings are offering slightly higher rents but are still affordable compared to Sharjah. With improved infrastructure, enhanced safety and a better quality of life, Ajman is proving to be a competitive alternative option to the nearby emirates.
Studio
1 BR
2 BR
3 BR
16,000
23,000
30,000
40,000
2 BR
3 BR
26,000
35,500
SECONDARY APARTMENTS Established neighbourhoods such as Ajman Downtown, Al Rashidiya and Al Nuaimiya have become more affordable, providing good entry opportunities for buyers and tenants.
Studio
1 BR
14,000
18,500
Source : Property listings as of September 2019
UMM AL QUWAIN RESIDENTIAL MARKET OVERVIEW
As of Q3 2019, the annual rent for apartments in Umm Al Quwain ranged from AED 13,000 per annum for studios to AED 30,000 per annum for three-bedroom apartments.
Construction of the Marina Canal Development is underway, which is part of the wider Umm Al Quwain Marina. Developer Emaar Properties plans to construct 6,000 villas, 2,000 townhouses and 1,200 resort and hotel rooms, with the central marina basin providing berths for more than 600 yachts. In a bid to attract further investment and boost the emirateâ&#x20AC;&#x2122;s economy, the Department of Economic Development has lowered trade licence fees by 20%.
24
UAE PROPERTY MARKET REPORT
RAS AL KHAIMAH RESIDENTIAL MARKET OVERVIEW
Apartments in Ras Al Khaimah offer higher yields, on average, than villas and townhouses.
Al Marjan Island Al Hamra Village Mina Al Arab Al Seer
As of Q3, apartment rents ranged between AED 16,000 per annum for studios to AED 35,000 per annum for three-bedroom apartments in older developments, and between AED 20,000 per annum for studios to AED 60,000 per annum for three-bedroom apartments in Mina Al Arab, Al Hamra Village and Al Marjan Island.
Al Uraibi
AVERAGE RENTAL RATES (AED/ANNUM) Q3 2019 Over the next few years, most of the residential supply is expected in Al Marjan Island, Al Hamra Village and the Bateen Al Samar Residential District, which is part of the Sheikh Zayed Housing Programme.
PRIME APARTMENTS Studio
1 BR
2 BR
3 BR
20,000
30,000
45,000
60,000
2 BR
3 BR
25,000
30,000
Work is also underway at Emaar Propertiesâ&#x20AC;&#x2122; Address Residences Al SECONDARY APARTMENTS Studio
1 BR
14,000
20,000
Source : Property listings as of September 2019
FUJAIRAH RESIDENTIAL MARKET OVERVIEW
As of Q3 2019, the annual rent for apartments in Al Fujairah ranged from AED 17,000 per annum for studios to AED 40,000 per annum for three-bedroom apartments.
Several development projects are underway in the emirate as part of its diversification efforts, including an underground oil storage facility and the expansion of the Hamad bin Abdullah Road to facilitate traffic flow into and within the city. The Sheikh Mohammed Bin Zayed City towards the outskirts in the south aims to solve the housing shortage in the emirate with construction of 1,100 luxury villas and new roads, as well as associated sanitation and sewage facilities.
25
RESIDENTIAL
Q 3 2O19
Q 3 2O19
UAE PROPERTY MARKET REPORT
DUBAI OFFICE MARKET OVERVIEW Office rents continued their decline into the third quarter with landlords settling on lower effective rates and providing incentives. In Q3 2019, businesses have continued to restructure their operations and limit exposure to real estate by consolidating multiple office spaces into one. Investors continue to display interest in well-located Grade A assets with credit-worthy tenants perceived as low-risk. DIFC, Dubai Design District and World Trade Centre are areas commanding some of the highest per sq ft rents. The concept of shared and co-working office spaces has witnessed delayed but rapid expansion in the region. An increasingly digital society comprising a demographic which values flexibility, sustainability and collaboration has driven the growth of the sector. On a cyclical level, the demand-supply imbalance, which has led to high vacancy rates, has worked in favour of the industry. To ensure occupancy of their premises, landlords are increasingly changing their approach to traditional leasing by offering units or floors to co-working and serviced office operators.
Dubai World Trade Centre
DUBAI AVERAGE GRADE A OFFICE RENTS (AED RANGE PER SQ FT)
75-195 250-275
Shell and Core
Dubai Marina
Fitted
85-100 100-120
Sheikh Zayed Road 65-100 120-140
160-180 250-275
Downtown Dubai
Dubai Media City, Internet City, Knowledge Village
(Rates quoted are inclusive of service charge but excluding chiller/utilities)
65
Business Bay 45-80 90-110
Barsha Heights 50-80
Dubai Healthcare City
100-120 150-170
90-100 190-215
Deira 55-85 85-100
DIFC
120
Dubai Design District 140-160 180-200
80-100
JLT 25-90 85-100
JAFZA 40-140 175-185
Dubai South (Dubai World Central) 40-50
65-75
20-60
4% 2%
40-60
DUBAI OFFICE ENQUIRIES BY SIZE (SQ FT) - Q3 2019
2%
8%
Office
29%
54%
Source : Cavendish Maxwell
26
90-110
55-75
DUBAI OFFICE ENQUIRIES BY SECTOR Q3 2019
10%
Dubai Silicon Oasis
Dubai Investments Park
4% 31%
Professional Services
0-1,000
Technology
1,001 - 5,000
Construction-related
5,001 - 10,000
Financial Services
>10,000
Healthcare, Beauty and Pharma
58%
UAE PROPERTY MARKET REPORT
DUBAI RETAIL MARKET OVERVIEW Extending the trend of the previous quarter, occupancy and rents continue to fall in most locations and across retail categories. Retail landlords are prepared to incentivise new entrants with service charge waivers, revenue share agreements and capital expenditure contributions if they believe that these measures would lead to longer lease terms from credit-worthy tenants. E-commerce continues to gain traction with the increased use of smartphones and digitised services by a young demographic. To benefit from its exponential growth, the Dubai Government recently announced an e-commerce strategy for the emirate which aims to increase the contribution of e-commerce to AED 12 billion in the local economy by 2023, and grow the regional and global share of e-commerce companies operating in Dubai to AED 24 billion by 2020. The plan also seeks to draw foreign direct investment (FDI) into the e-commerce sector to ensure its contribution to increasing FDI flows into Dubai.
RETAIL RENTAL RATES Q3 2019 (AED/SQ FT) Minimum
Maximum
Strip retail or retail in residential buildings
60
250
Community malls
60
300
Regional mall/Destination retail
175
350
150
400
250
1,500
Retail Type
Central Business District (DIFC/Downtown/ Sheikh Zayed Road/City Walk) Super regional malls * Rates are inclusive of service charge and exclude rent fee/CapEx
Source: Cavendish Maxwell
FUTURE MALL SUPPLY Malls
Gross Leasable Area (sq ft)
Meydan One
3,000,000
Nakheel JVC - The Circle Mall
44,500
Nakheel Palm
4,500,000
Meadows Village (Expansion)
95,000
Dubai Hills Mall
2,000,000
Burj Al Nahar
240,000
The Avenue - Dubai Silicon Oasis
775,000
Source: Cavendish Maxwell
27
COMMERCIAL
Q 3 2O19
Q 3 2O19
UAE PROPERTY MARKET REPORT
ABU DHABI OFFICE MARKET OVERVIEW The office market in the capital saw rents decline 2-3% on a quarterly basis on continued muted interest from the oil and gas sector which is one of the bigger tenants. Supply of office space also increased in some locations such as Masdar City. Office market dynamics continued to be in favour of tenants in the third quarter of 2019. Landlords continue to offer incentives such as longer rent-free periods and flexible payment terms and are also absorbing service charges in some areas to attract and retain tenants. In a bid to enhance the capitalâ&#x20AC;&#x2122;s commercial and economic competitiveness, the Abu Dhabi government has established a specialised court dealing with commercial law cases. The Abu Dhabi Commercial Court will specialise in settling civil and commercial disputes in the business community, protecting rights and helping enhance investor confidence.
OFFICE RENT PERFORMANCE (AED/SQ FT) Reem/Maryah Island Shell and Core
Fitted Low High
Grade A
-
100
175
Grade B
60
70
90
Grade C
50
40
60
Abu Dhabi MainIand Shell and Core
Fitted Low High
Grade A
-
100
130
Grade B
50
60
75
Grade C
35
40
60
Mussafah Shell and Core
Fitted Low High
Grade B
40
60
75
Grade C
-
30
40
RETAIL MARKET OVERVIEW The third quarter of 2019 saw the opening of the extension of The Galleria Al Maryah Island which had over 400,000 people visit in the first few days post the launch. The successful opening led to retailers requesting additional space to expand with others enquiring about leasing space at the new project. Recent deals by developers suggest confidence in the retail sector of Abu Dhabi. Aldar Properties recently inked an agreement with fashion and lifestyle retail conglomerate, Apparel Group, for 23 stores across three of its retail malls, Yas Mall and The Mall at World Trade Centre (The Mall at WTCAD) in Abu Dhabi and Al Jimi Mall in Al Ain. The deal represents over 100,000 sq ft of retail space across the three malls. Reem Mall is another anticipated opening, scheduled for completion by late 2020. The development will offer 2 million sq ft of leasable area comprising 450 stores, including 100 dining options and several attractions. 28
UAE PROPERTY MARKET REPORT
NORTHERN EMIRATES OFFICE MARKET OVERVIEW To increase the attractiveness of the emirate as a hub for commercial activity, the Government of Sharjah is powering through with its smart city agenda. The partnership by Sharjah City Municipality and EVOTEQ to use Artificial Intelligence (AI) to make the former’s headquarters a smart building is an initiative to achieve this goal. Other government projects include the completion of an AED 44 million project in Al Khan comprising offices, F&B units and associated facilities by Sharjah Electricity & Water Authority (SEWA). Among the private players, facilities management provider Emrill Services also expanded in the Northern Emirates, opening two offices in Sharjah and Ras Al Khaimah. Environmental company Bee’ah’s new headquarters in Sharjah, the ‘Office of The Future’, is set to become the world’s first AI-enabled building once it opens in Q4 2019.
SHARJAH OFFICE RENTAL RATES (AED/SQ FT) Abu Shagara/Al Qasemiah Shell and Core
Fitted
25 - 30
40 - 50
Corniche Area (Al Khan, Al Majaz) Shell and Core
Fitted
25 - 35
40 - 60
Al Taawun Road Shell and Core
Fitted
25 - 35
40 - 60
Industrial Area Shell and Core
Fitted
25 - 30
40 - 50
RETAIL MARKET OVERVIEW In June 2019, Bank of Sharjah completed the construction of the AED 316 million Safari Mall, a two-storey shopping centre at Muweliah in Sharjah. Also in Q2, Master Investment completed the Grove Village at Ras Al Khaimah. The AED 96 million project comprises retail stores, restaurants, and 4 and 5-star hotels.
29
COMMERCIAL
Q 3 2O19
Q 3 2O19
UAE PROPERTY MARKET REPORT
DUBAI HOSPITALITY MARKET OVERVIEW Hotel occupancy declined 1.9% in January-August 2019 versus the same period a year ago, with the decline most evident in the luxury sector. Comparatively, the upper-midscale sector witnessed a rise in occupancy at 4.6% during the January-August 2019 period. Average Daily Rates (ADRs) displayed an overall decline of 13 % across all sectors. The rise of the sharing economy and an increasing proportion of millennials and Gen Z in the consumer mix has seen higher demand for short-term rental accommodation and holiday homes, resulting in a corresponding increase in the supply of such offerings. Emaar Properties too has recently marked its entry into the space with its short-term rental platform, Ease by Emaar. Despite the overall downtrend in the hospitality sector, a small number of hotels in areas such as Palm Jumeirah and Sheikh Zayed Road have bucked the trend, increasing profitability in 2019. Expected supply during the last quarter of 2019 stands at 4,289 keys, with 81 % of these in the upscale and upper upscale segments.
OCCUPANCY AND REVPAR (AED)
600
73%
550
72%
500
71%
626
544
2018
2019
ADR
70%
Rate (AED)
73%
450
500
74%
74%
Occupancy
Rate (AED)
650
74%
450
74% 73%
400 350 300
73% 72%
465
396
2018
2019
Rev PAR
OCC %
71% 70%
Occupancy
OCCUPANCY AND ADR
OCC %
Data as of August 2019
Source: STR Global
ABU DHABI HOSPITALITY MARKET OVERVIEW Occupancy rates in hotels and resorts across Abu Dhabi showed a marginal increase in January-August 2019 versus the same period a year ago. ADRs for hotels rose 5.6% but resorts declined 1.2% during the period. According to STR Global, the largest ADR and Revenue Per Available Room (RevPAR) increases occurred during the Eid al-Adha holiday between 11 and 13 August 2019. Whilst no additional supply is scheduled to hit the market in the remainder of 2019, Abu Dhabi is set to receive approximately 600 keys in the luxury hospitality segment in 2020.
OCCUPANCY AND REVPAR (AED)
75%
75%
75%
215
260
74%
240
73%
220
72%
200
273
288
2018
2019 ADR
Data as of August 2019 30
220
OCC %
71%
Rate (AED)
Rate (AED)
280
76%
Occupancy
300
76% 75%
75%
75%
210
74%
205
73%
200 195
72% 204
216
2018
2019
Rev PAR
Occupancy
OCCUPANCY % AND ADR
71%
OCC % Source: STR Global
UAE PROPERTY MARKET REPORT
NORTHERN EMIRATES HOSPITALITY MARKET OVERVIEW Occupancy, ADR and RevPAR for hotels in the Northern Emirates of Ras Al Khaimah and Fujairah were lower in January-August 2019 versus the same period a year ago. For the rest of 2019, no additional supply is expected in the market. Future supply is expected to be more heavily concentrated on the upper upscale segment. In Ras Al Khaimah, the concentration of hospitality projects is higher compared to residential developments in leisure destinations such as Al Marjan Island. Out of 180 plots on the island, over 70% have already been sold largely to hotel and resort developers. Upcoming properties include a Rove Hotel, the Hampton by Hilton and a resort by BarceloĚ Hotel Group. Complete development of the island is expected by 2025.
OCCUPANCY AND REVPAR (AED) 450
76 74%
400
72%
350
70%
300
70%
550
70%
500
68%
450
66%
66%
400
64%
350
62%
300
607
250
391
521
2018
353
2019
Ras Al-Khaimah ADR Ras Al-Khaimah OCC
72% 70%
68%
250
66%
66%
200
64%
150
62%
100
60%
50
68%
0
427
257
365
Ras Al-Khaimah RevPAR Ras Al-Khaimah OCC
Fujairah+ OCC
62%
62%
2018
Fujairah+ ADR
70%
70%
Occupancy
74%
600
Rate (AED)
650
Occupancy
Rate (AED)
OCCUPANCY AND ADR
60%
218
68%
2019 Fujairah+ RevPAR Fujairah+ OCC Source: STR Global
Data as of August 2019
UPCOMING SUPPLY SPLIT BY CLASS - Q4 2019
DUBAI
ABU DHABI AND AL AIN
NORTHERN EMIRATES
Segment
Upcoming supply
Segment
Upcoming supply
Segment
Upcoming supply
Economy Class
2%
Luxury Class
29%
Luxury Class
17%
Luxury Class
16%
Upper Midscale Class
9%
Upper Midscale Class
22%
Midscale Class
4%
Upper Upscale Class
42%
Upper Upscale Class
43%
Upper Midscale Class
12%
Upscale Class
20%
Upscale Class
19%
Upper Upscale Class
38%
Upscale Class
28%
31
HOSPITALITY
Q 3 2O19
Q 3 2O19
UAE PROPERTY MARKET REPORT
DUBAI INDUSTRIAL MARKET OVERVIEW With supply continuing to outweigh demand, landlords are having to align price points with occupier budgets. As a result, an increasing number of transactions continued, despite vacancy levels still rising. A gap yet to close is the two-tier quality division that has become synonymous with Dubai’s onshore (non-bonded) industrial market. Whilst free zone stock is good quality, non-bonded stock remains poor overall. This is creating a market adjustment lag, as occupiers continually seek to modernise operations. This flight-to-quality has placed demand pressures on the finite amount of Grade A ‘European specification’ onshore stock, whilst the supply side of traditional warehouses is fighting for lean demand. Enquiry levels increased substantially, rising 71% year-on-year for Q3 2019. Whilst a significant proportion were opportunistic, seeking ‘distressed sales’, it is evident that appetite is increasing. The general trading sector remained the most active, accounting for over 30% of enquiries.The logistics and distribution sector, typically the second greatest source of demand but now third, recorded 12%, whilst manufacturing took a 17% share.
Rent (AED/sq ft)
WAREHOUSE RENTS IN DUBAI 40
40
30
30
20
20
15-20
20
15-20
20
20
10
20 10
0
28 33
22 30 JAFZA
Dubai Investment Park
25 40
25 30
20 30
Al Quoz
National Industries Park
Dubai Industrial Park
Source: Cavendish Maxwell
Minimum
25 35 Dubai South (DWC)
Maximum
0
Sub Lease Fee in %
*Transacted prices not listing/asking prices. * Assumes logistics warehouse, min 8 m height, 2 loading bays without air conditioning * Sub-lease fee is paid on top of rent to the freeholder/government
FREEZONE WAREHOUSES ENQUIRIES BY SECTOR – Q3 2019 2%
ONSHORE WAREHOUSES ENQUIRIES BY SECTOR – Q3 2019
2% 2%
3%
5%
3%
32%
5%
1% 2% 2%
5%
5%
5%
40%
5%
7%
10% 10% 17% 12%
Source: Cavendish Maxwell 32
10%
13%
General Trading Manufacturing F&B Services Commodities E-commerce Oil and Gas Engineering Warehouse Cold store Learning and Developmet Construction Logistics and Distribution
UAE PROPERTY MARKET REPORT
ABU DHABI INDUSTRIAL MARKET OVERVIEW The capital is taking several economic diversification efforts from long-term residency visas to fee reductions, aimed at stimulating investments and improving the business environment. As part of the Ghadan 21 initiative, which is an AED 48.9 billion investment plan including 50 initiatives to stimulate the economy, the Khalifa Industrial Zone Abu Dhabi (KIZAD) has waived charges for over 75% of its services whilst lowering fees for many of the remaining services. A key component of the diversification plan is encouraging overseas companies to set up shop in the UAE. An initiative towards this end is the establishment of the China-UAE Industrial Capacity Cooperation Demonstration Zone Project within KIZAD that has helped attract over 20 Chinese companies since its launch in 2018, bringing in investments of over AED 6.2 billion. With an aim to leverage the export sector, the government also launched the Abu Dhabi Exports Office (ADEX). The body will provide financing and guarantees to overseas buyers who wish to import goods and services from the UAE.
NORTHERN EMIRATES INDUSTRIAL MARKET OVERVIEW Warehouse lease rates in Ajman and Ras Al Khaimah ranged between AED 15 and 25 per sq ft, proving to be competitive alternatives to Sharjah where rates were slightly higher in the range of AED 15 and 30 per sq ft. In line with economic diversification efforts in the rest of the UAE, the east coast emirate of Fujairah is also undertaking a raft of measures in areas including downstream petrochemicals, urban development, tourism and infrastructure.
Source : Cavendish Maxwell
33
INDUSTRIAL
Q 3 2O19
Q 3 2O19
UAE PROPERTY MARKET REPORT
METHODOLOGY Residential sales prices and rents are derived from Property Monitor (www.propertymonitor.ae), the region’s leading real estate intelligence platform and the only data source powered by RICS-accredited professionals; bringing unprecedented transparency and accuracy to local property markets. Through Property Monitor, market stakeholders can directly access real-time, transparent and accurate intelligence, unmatched anywhere else in the region. The platform empowers investors, property specialists and banking professionals with authoritative data, analytics and insights that closely correlate with market movements, empowering confident and informed property-related decisions. The average residential sales price per sq ft is taken from Property Monitor which incorporates signed contracts, registered transactions, valuations and listings verified by Cavendish Maxwell’s market-leading valuation department. The Property Monitor Residential Survey is a quarterly study of agent opinions designed to identify residential market sentiment. This research highlights how new enquiries, leasing activity and transactions, among other metrics, changed from quarter to quarter with agent predictions compared to actual real market performance. Supply projections for residential projects are based on the Cavendish Maxwell Supply Tracker, which tracks supply in real time, including regular tracking of construction projects, new launches and delays. This is achieved through site inspections as well as regular feedback from developers, contractors, Cavendish Maxwell’s building consultancy team and related government entities.
STRATEGIC CONSULTING AND RESEARCH Cavendish Maxwell’s strategic consulting and research team has some of the region’s most highly qualified data analysts with a wealth of international real estate advisory experience. We work closely with a broad portfolio of banks, property developers, government entities and private clients, providing authoritative, industry-specific research and advice to maximise portfolio performance. Our strategic consulting and research expertise spans a variety of sectors including residential, office, hospitality, education and mixed-use developments, and our team draws on reliable proprietary data to allow for thorough and accurate analysis of trends and market fluctuations.
40
BANKS
34
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Q 3 2O19
UAE PROPERTY MARKET REPORT
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35
D U BA I
ABU DHABI
M U S CAT
2205 Marina Plaza Dubai Marina P.O. Box 118624 Dubai United Arab Emirates
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T: +971 4 453 9525
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Disclaimer: The information and analysis contained in this report is based on information from a variety of sources generally regarded to be reliable, and assumptions which are considered reasonable, and which was current at the time of undertaking market research, but no representation is made as to their accuracy or completeness. We reserve the right to vary our methodology and to edit or discontinue the indices at any time, for regulatory or other reasons. The report and analysis do not purport to represent a formal valuation of any property interest and must not be construed as such. Such analyses, including forward-looking statements are opinions and estimates only, and are based on a wide range of variables which may not be capable of being determined with accuracy. Variation in any one of these indicators can have a material impact on the analysis and we draw your attention to this. Cavendish Maxwell and Property Monitor do not accept any liability in negligence or otherwise for any loss or damage suffered by any party resulting from reliance on this report.